NZD/USD 0.8175 – 0.8285
GBP/AUD 1.4520 – 1.4600
Australian Dollar fundamental analysis:
It was a fairly quiet day yesterday for the Aussie locally with most direction being taken from Europe and the US. Cyprus is still demanding most of the headlines with rumours of a deal with Russia to purchase some of their assets (banks and gas) or increasing their current loans providing some support for riskier assets and sending the Aussie up marginally. The Aussie remains held within recent ranges and has struggled getting past 1.04. With the US Fed announcing this morning that they will maintain current policies as expected, the Aussie settled back towards where we left it yesterday at 1.0380 and is little changed at time of writing. Today looks set to be another quiet day locally with minimal activity data wise, although we do have Chinese HSBC flash PMI out around midday which may provide a bit of direction.
New Zealand Dollar fundamental analysis:
The Kiwi fell yesterday after the local current account balance came in worse than expected at -.255B compared to estimates of -4.418B which means the deficit is now at 5% of GDP and the highest since 2009. The NZD drifted lower towards 0.8215 following the release and failed to benefit from improved sentiment that saw other risk correlated currencies move higher overnight. Hope for a solution to the Cyprus issue saw Euro and Aussie both gain overnight and this in turn has seen the NZD crosses against these currencies fall with NZD/EUR now back at 0.6360 and AUD/NZD back above 1.2600. Focus will now turn to local GDP data which should have been released by the time you are reading this, with economists picking for a rise of 0.9% for the fourth quarter of last year. Meanwhile NZD/USD is currently trading flat at 0.8225.
Great British Pound fundamental analysis:
This is feeling very familiar; after another busy night for the pound with a wide trading range we are still opening unchanged around 1.5100. In the Bank of England minutes from this month's meeting it was revealed that there was a 6-3 vote to keep asset purchases unchanged, the same as the previous month, but the focus for investors was that one of the reasons for reluctance to add more stimulus was the recent weakness in the pound. This saw the pound initially rally towards 1.5150 but further gains were prevented by the number of jobless claims not falling as much as expected at -1.5k versus -5k, while the unemployment rate remained at 7.8%. Also causing some volatility last night was the release of the 2013 budget which while providing little new in the way of forecasts, it did provide a possibility of a change in the remit of the Bank of England. This saw the pound move back up again this time breaking through 1.5150 on the way to 1.5175 but it has since drifted lower to today's open. Meanwhile on the pacific crosses the pound is up slightly against the Aussie (1.4565) and the Kiwi (1.8350)
Global market and Majors currency fundamental analysisi:
As expected two key events dominated overnight; with investors' view on the Cypriot crisis improving and the US Fed maintaining their $85bn per month asset purchases. There were several rumours floating around last night that provided investors with some hope including over analysed comments from the ECB that they will 'provide liquidity within current rules', while increased loans from Russia has also been suggested. Banks in Cyprus will now remain closed till next week, which will be costing the economy, but without a funding solution the banks would collapse. This issue is likely to keep investors zigzagging over coming days as the story develops. Overnight the Euro climbed around a cent, moving from a low of 1.2870 to reach close to 1.2970 prior to the Fed's release. There was no real change in the message from the Fed, as expected, as they left interest rates unchanged and maintained the $40/45bil spilt in mortgage backed securities and treasury securities. They confirmed their plan to continue the asset purchases until unemployment drops to 6.5% and inflation remains below 2.5% despite recent improvements in economic data. With these targets in mind it seems that the number of jobs being added each month would have to go up significantly before any consideration can be made of reducing down some of the asset purchases before next year. Accompanying the statement was the quarterly economic forecasts which only made minor adjustments to December's numbers with growth adjusted from 2.3-3.0% to 2.3-2.8%.
Source: ozforex
Data releases:
AUD: CBAHIA house affordability
NZD: GDP, Credit card spending
JPY: Merchandise trade balance, All industry activity index
GBP: Public finances, Retail sales, Public sector net borrowing
EUR: Eurozone PMI
USD: Initial jobless claims, Existing home sales, Markit PMI, Philadelphia Fed, Leading indicators
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